By Angus Loten
Microsoft Corp.'s bet on delivering business software over the
internet is paying off, thanks to the tech giant's ability to
understand the needs of its corporate customers and help them
adjust to a rapidly changing market.
The company's record fourth-quarter revenue, announced last
week, was boosted by its cloud-computing business, where sales were
up 39% from a year earlier. Revenue from its Azure cloud service
alone rose 64%, the company said.
The success rests on its technology, combined with an
understanding of complex enterprises' software needs. The company
over a period of decades has developed the ability to understand
large corporations. This has enabled Microsoft to develop a range
of technologies that allows customers to consolidate their
purchases with a familiar source. At the same time, it has stayed
technologically competitive.
"Microsoft isn't just a cloud company," said Sue Bergamo, chief
information officer at digital commerce and marketing company
Episerver, a Microsoft client. "They are a partner who works with
customers to understand business problems," she said.
One of Microsoft's key advantages in the cloud market is an
appreciation of the unique tech needs of large organizations, said
Tim Crawford, founder and chief information officer of AVOA LLC, a
strategic advisory firm.
"One of the things about the enterprise that very few people
understand is the complexity of enterprise IT," he said, adding
that Microsoft speaks to CIOs and other corporate IT managers "in
language they can understand."
The Redmond, Wash., company's focus on big enterprise customers
is helping it keep pace with the cloud-market leader, Amazon.com
Inc.'s cloud unit Amazon Web Services. Amazon holds roughly a third
of the world-wide cloud market, with Microsoft in second place at
16%, far ahead of the rest of the pack, according to research firm
Canalys.
Despite Azure's rapid growth, its market position relative to
AWS has changed little in recent years, as gains from the cloud
market accrue to the two front-runners.
Steve Stine, senior vice president of business transformation at
AT&T Communications, said Microsoft's grasp of corporate
customers' computing needs was a key reason behind a move announced
last week to shift most of the internal business applications in
AT&T Inc.'s communications unit to Azure, Microsoft's main
cloud platform.
"We'll work with Microsoft because they have experience with
doing this and helping large enterprises," Mr. Stine told CIO
Journal.
Deals with AT&T and other large organizations are propelling
sales in Microsoft's cloud unit and lifting overall revenue.
A Microsoft spokesman credited the company's cloud success with
being able to meet customer needs.
The company's gains are expected to grow as more companies
ratchet up spending on cloud services, which provide on-demand
software, computing power and storage.
Global spending on the public cloud, where companies pay tech
firms for computing and storage, is expected to more than double
over the next five years to roughly $500 billion in 2023 from $229
billion this year, according to International Data Corp. More than
half of total spending will come from businesses with 1,000
employees or more, IDC said.
Amazon's AWS counts Dole Food Co., Hess Corp., McDonald's Corp.
and other large firms as customers. It has also proved popular with
startups, small businesses and companies that model their
technology infrastructure on consumer internet firms, many of which
seek individual software tools to develop unique services, rather
than fully formed platforms, said AVOA's Mr. Crawford.
Amazon declined to comment.
For Microsoft, it helps that the company has long had a foot in
the door with enterprise customers through its suite of business
applications, which many businesses have traditionally run on
in-house servers and data centers -- easing the transition to the
cloud.
Taking its cue from CIOs and other corporate IT managers,
Microsoft has invested heavily in capabilities like artificial
intelligence, at a time when more businesses are experimenting with
advanced digital tools, said Dave Bartoletti, vice president and
principal analyst at Forrester Research.
"Clouds are the best place to experiment," Mr. Bartoletti
said.
Microsoft this week announced plans to invest $1 billion in
artificial-intelligence startup OpenAI LP, a move aimed at
developing supercomputing technologies for Azure, the company
said.
"One of the things Microsoft is really good at is that it can
provide solutions all the way to the edge and to the cloud and
everything in between," said Mr. Crawford of AVOA. "No other
companies really can do that at the software level," he said.
--Steven Rosenbush and Agam Shah contributed to this
article.
Write to Angus Loten at angus.loten@wsj.com
(END) Dow Jones Newswires
July 23, 2019 19:15 ET (23:15 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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